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Monitoring and Pay: An Experiment on Employee Performance under Endogenous Supervision

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  • Dennis Dittrich

    ()
    (University of Erfurt)

  • Martin G. Kocher

    ()
    (Universiteit van Amsterdam)

Abstract

We present an experimental test of a shirking model where monitoring intensity is endogenous and effort a continuous variable. Wage level, monitoring intensity and consequently the desired enforceable effort level are jointly determined by the maximization problem of the firm. As a result, monitoring and pay should be complements. In our experiment, between and within treatment variation is qualitatively in line with the normative predictions of the model under selfishness assumptions. Yet, we also find evidence for reciprocal behavior. The data analysis shows, however, that it does not pay for the employer to rely on the reciprocity of employees.

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Bibliographic Info

Paper provided by Tinbergen Institute in its series Tinbergen Institute Discussion Papers with number 06-098/1.

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Date of creation: 01 Nov 2006
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Handle: RePEc:dgr:uvatin:20060098

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Keywords: incentive contracts; supervision; efficiency wages; experiment; incomplete contracts; reciprocity;

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Cited by:
  1. Charness, Gary & Kuhn, Peter J., 2010. "Lab Labor: What Can Labor Economists Learn from the Lab?," IZA Discussion Papers 4941, Institute for the Study of Labor (IZA).
  2. Yongjin Wang & Laixun Zhao, 2013. "Saving Good Jobs under Global Competition by Rewarding Quality and Efforts," Discussion Paper Series, Research Institute for Economics & Business Administration, Kobe University DP2013-17, Research Institute for Economics & Business Administration, Kobe University, revised May 2013.

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